Australian Dollar US Dollar (AUD/USD) Exchange Rate Stable on Rising US Treasury Yields
The Australian Dollar to US Dollar (AUD/USD) exchange rate is holding steady this morning following a jump in US treasury yields.
At the time of writing the AUD/USD exchange rate is virtually unchanged from today’s opening level.
US Dollar Australian Dollar (USD/AUD) Exchange Rate Stable amidst Pick-Up in US Treasury Yields
The US Dollar (USD) is holding steady against the Australian Dollar (AUD) as well as other currencies such as the Pound (GBP) and Euro (EUR) this morning following another uptick in US treasury yields.
US bond yields have continued to ramp higher this week on the back of some robust US economic data, with ten-year yields striking a new seven-year high early on Friday and strengthening the USD exchange rate.
The release of a strong-than-expected US retail sales report on Tuesday appears to have been the main motivator for the recent uptick in yields.
This was due to the robust sales figures prompting renewed speculation into the Federal Reserve’s policy plans for 2018, with economists suggesting the Fed could deliver up to three more rate hikes in 2018.
Cleveland Fed President, Loretta Mester said earlier this week:
‘It could be that in order to maintain our policy goals, we may need to move the fed funds rate, for a time, a bit above the level of the funds rate that is expected to prevail over the longer run.’
Australian Dollar US Dollar (AUD/USD) Exchange Rate Muted on Trade Concerns
The Australian Dollar (AUD) meanwhile remains subdued this morning as markets were spooked by renewed trade war fears.
This comes as US President, Donald Trump is set to meet with officials from China for the latest round of talks, while suggesting the prospects of a deal are limited.
Elias Haddad, Senior Currency Strategist at the Commonwealth Bank, said:
‘Chinese Vice Premier Liu is in Washington until Friday to try and resolve the trade dispute with the Trump administration, but President Trump warned he doubts China trade talks will be successful.’
The prospect of a US-China trade war is a major drag on market risk appetite and dents the appeal of commodity driven currencies such as the Australian Dollar.
AUD/USD Exchange Rate Forecast
Looking ahead to next week’s session the main source of movement in the Australian Dollar US Dollar (AUD/USD) exchange rate is likely to be the release of the minutes from the latest Federal Open Market Committee (FOMC) meeting.
While the FOMC voted to leave US interest rates on hold last month, markets are hopeful the minutes will give a greater insight to the Fed’s policy plans for the remainder of 2018.
This could see the US Dollar (USD) rocket if the Fed’s outlook appears to suggest a more aggressive path of monetary tightening over the next few months.
Meanwhile it’s set to be an extremely quiet session in terms of Australian economic data next week.
This could see the Australian Dollar (AUD) exchange rate stumble as the ‘Aussie’ is left vulnerable to external influences such as the renewed trade concerns or sliding commodity prices.